A common mistake that companies make when pursuing digital transformation is viewing the process as a collection of technology projects, and not a business strategy that is shaped and driven by senior management and the board. They become so focused on the technological aspects of this massive change effort that they overlook the “people factor,” which is critical to their success in becoming a true digital enterprise.

Leaders of digital enterprises must be both technologically competent and business-savvy, and able to assemble and guide teams with strong digital expertise. Leading tech firms have a good handle on these things. But many emerging companies — the “born digital” businesses — are not always as strong across these competencies as they may believe. They have highly skilled tech talent focused on disruption and innovation but may lack the seasoned business leadership needed to evolve and grow the business over the long term and help it maintain its competitive advantage. In short, being born digital doesn’t instantly make you a sustainable digital enterprise.

Meanwhile, well-established, legacy businesses often find themselves somewhere in-between. They may have a good mix of business and technology talent in place at the senior leadership level, yet they do not understand what it means to act digital at their core. They don’t have the right type of “digital team” needed to force meaningful change throughout the organization. Building that team is about more than just aligning resources with the right skills — it’s about mindset. The entire workforce, from the top down, must think like a digital enterprise to become a digital enterprise.

Digital Thinking Needs to Run Deep

Without the right leadership and mindset, companies risk becoming digital only on the surface. They make changes, such as embracing a new business model or technology, that help them do business more effectively with customers in an increasingly digital world. But at their core, they are still analog in how they think and operate.

As discussed in an earlier post, TMC companies, including those born digital, must evolve both externally and internally — as well as continuously — to become successful digital enterprises. External evolution relates to how the business is positioning itself in and contributing to the expanding digital economy. Internal evolution is about the organization strategically transforming its business processes, technology infrastructure, workforce culture and more to compete effectively as a digital business.

Our recent white paper, Catching the Digital Wave of Change, talks about the fact that, over the next few years, many organizations will need to undergo radical change programs. In some cases, they may need to completely reinvent themselves to remain relevant and competitive. For many of these businesses, that change process will require building a culture of innovation and embracing a world of experimentation and failure that is alien to them. And that is why the right leadership — with a clear vision and the ability to make bold and sometimes very uncomfortable decisions for the business — is necessary for digital success. Digital leaders don’t just have ideas; they can execute on those ideas.

Before any business, traditional or born digital, embarks on a digital transformation journey, its leadership must ensure that the organization has:

A sound digital strategy and a governance structure that are well-understood by everyone in the organization.

A strong digital team ready to execute the digital strategy. That includes identifying senior leaders who will manage the effort on a day-to-day basis, promote strong collaboration and communication throughout the organization, and are experts at driving change.

A workforce that feels safe and empowered to think creatively and innovate, and take appropriate risks, to help the business achieve its digital vision.

Keeping an Eye Toward the Future

For some firms, preparing for digital transformation could mean significant reorganization and even streamlining of their current workforce. As organizations embrace new business models and ways of working, like cloud computing and analytics, they will need employees who can work with new technologies and function effectively as part of a multidisciplinary team. And as they automate repetitive or labor-intensive business processes, and become more agile operations, some organizations may find they need fewer workers.

As for companies that are born digital, implementing a solid corporate governance structure as part of their digital transformation journey will be especially important, as it will help to position them for future growth. Without the right foundation, these businesses risk failure in the long term — no matter how disruptive and innovative they are today.

All businesses pursuing digital transformation also must be supported by a workforce that is excited about the opportunities that digital disruption presents, and inspired by the vision that has been defined by the leadership team. In fact, we have found that this excitement is a hallmark of a company that is, or is poised to become, a digital leader.

Another characteristic of a digital leader is an executive team that is invigorated by change, is curious and engaged, and is excited — and not frightened — about the opportunities that digital transformation presents to the business. Many traditional leaders do not fit that mold. However, if they believe in legacy and longevity for their business, they have no choice but to embrace disruptive change. If they are unable or unwilling to do that, then they must at least invest in talented people who can guide the organization through digital transformation today, and become the leaders of tomorrow’s digital enterprise.